Sanoma Oyj (HEL:SAA1V) Has Announced That It Will Be Increasing Its Dividend To €0.27

Sanoma Oyj (HEL:SAA1V) has announced that it will be increasing its dividend on the 20th of April to €0.27. This takes the annual payment to 4.2% of the current stock price, which is about average for the industry.

Check out our latest analysis for Sanoma Oyj

Sanoma Oyj's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Sanoma Oyj was paying out 88% of earnings, but a comparatively small 63% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 9.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 95% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was €1.10 in 2012, and the most recent fiscal year payment was €0.54. Doing the maths, this is a decline of about 6.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Sanoma Oyj May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's not great to see that Sanoma Oyj's earnings per share has fallen at approximately 2.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Sanoma Oyj's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Sanoma Oyj is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Sanoma Oyj that investors should take into consideration. Is Sanoma Oyj not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.